New Foreign Affairs Minister pushes back on U.S. tax-credit plan for electric vehicles

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Foreign Affairs Minister Mélanie Joly strongly objected to a U.S. proposal to offer tax credits to people who buy electric vehicles assembled in the United States in her first in-person meeting with U.S. Secretary of State Antony Blinken.

Ms. Joly travelled to Washington on Friday to speak to the Biden’s administration’s top foreign policy adviser before next week’s summit of the three North American leaders. The tax credit proposal is expected to be a key topic of debate at the summit, known as the Three Amigos.

U.S. President Joe Biden will gather with Prime Minister Justin Trudeau and Mexican President Andres Manuel Lopez Obrador on Nov. 18 in Washington amid growing concerns about U.S. protectionism. It’s the first meeting of the Three Amigos since Donald Trump became president in 2017.

The Canadian and Mexican governments are concerned that the proposed U.S. tax credit could disrupt the future of electric-vehicle production in their countries because auto companies might switch their manufacturing to the United States. They also say it would undermine the auto provisions of the renegotiated trilateral trade pact now known as the United States-Mexico-Canada Agreement, which promises a level playing field for the sector in all three countries.

Given the integrated nature of the North American auto industry, Ms. Joly warned that any U.S. move would be bad for Americans as well, because many U.S.-made vehicles and auto parts for export are assembled partly in Canada.

“Thousands of jobs on both sides of the border are dependent on this supply chain being integrated,” she told reporters after the meeting. “We will continue to make sure that this is well known throughout the administration but also throughout Congress as well.”

The Prime Minister is expected to take up the message with Congressional and U.S. business leaders when he is in Washington next week.

In a recent letter to Democrat and Republican leaders in the U.S. Senate and House of Representatives, Trade Minister Mary Ng wrote that providing thousands of dollars in tax credits exclusively for vehicles assembled in the United States would cause “serious and irreparable harm to the Canadian automotive sector.”

Ms. Joly also made the point that Canada has one of the world’s biggest reserves of minerals required for electric vehicles, and that the U.S. would need those minerals as car production switches from gas to battery powered.

“In that sense, we have lots to gain by working together,” she said. “Canadians know that we have to defend our interests, and we can never take anything for granted.”

A U.S. House panel in September approved legislation that would boost existing tax credits for electric vehicles. The new credits would include US$4,500 for each union-made vehicle produced in the United States, and US$500 for each U.S.-made vehicle battery. In total, each vehicle would be eligible for up to US$12,500 in credits.

The proposal is part of Mr. Biden’s $1.75-trillion Build Back Better legislation, which includes significant social spending and climate change initiatives.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association in Canada, recently told The Globe and Mail that credits would also harm U.S. companies, which make one million cars in Canada each year using 50-per-cent U.S. parts and 60-per-cent U.S. raw materials.

The credit is opposed by West Virginia Senator Joe Manchin, an influential and moderate Democrat. The Biden administration is counting on Mr. Manchin’s vote to get the bill through an evenly divided Senate. He has said it’s “not American” to use tax dollars to pick winners and losers.

Mr. Trudeau and his Mexican counterpart are also expected to object to Mr. Biden’s Buy American proposals for U.S. infrastructure projects.

Ms. Joly also spoke to Mr. Blinken about the dire situation in Afghanistan, which faces shortages of food because of the collapse of the economy since the Taliban took over in early August. She said Canada is determined to bring in 40,000 Afghan refugees and is working with non-governmental organizations and neighbouring countries to help them get out of Afghanistan.

With a report from Steven Chase

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